Fed Beige Book: Econ Still Lackluster In Mar, Early Apr

Dow Jones Newswires | April 23, 2003 | Rebecca Christie

[Starwind]

Fed Beige Book: Econ Still Lackluster In Mar, Early Apr

Beige Bk: Iraq War, Poor Weather Hurt Consumer Spending

Beige Bk:Too Early To Tell Full War Impact On Confidence

Beige Bk: Firms Optimistic On Retail Outlook Next 6 Mos

Beige Bk: Labor Mkts Soft, But Some Signs Of Improvement

Beige Bk:Manufacturing Still Weak, But Some Growth Cited

Beige Bk: Firms Cautious On Spending; Housing Mkt Strong

Beige Bk: No Wage Pressures; Insurance, Health Costs Up

Beige Book -2: Report Covers Length Of Iraq War

WASHINGTON (Dow Jones)--The U.S. economy continued to struggle in March and early April as the war with Iraq restrained business and consumer spending, the Federal Reserve said Wednesday.

"The pace of economic activity continued to be lackluster during March and the first two weeks of April," the Fed said in its so-called Beige Book survey of economic conditions.

"The onset of the war with Iraq appeared to have some effect on sales and spending, although it is too early to ascertain the full effect of the war on both consumer and business confidence," the Fed said.

The Beige Book is a summary of economic activity prepared for use at the central bank's next Federal Open Market Committee meeting May 6.

The most recent report was prepared by the Federal Reserve Bank of Cleveland and reflects information gathered before April 15.

The report covers the length of the Iraq war, which began March 20. The heavy fighting in Iraq lasted several weeks, but is now over. U.S. commanders declared victory over Saddam Hussein's regime April 9.

In its previous Beige Book report March 5, the Fed said the U.S. economy remained weak amid uncertainty over the economic outlook and worries about a possible war with Iraq. .

(MORE) Dow Jones Newswires

04-23-03 1400ET- - 02 00 PM EDT 04-23-03

WASHINGTON (Dow Jones)--Following is a district by district summary of economic conditions from the Beige Book report. .

Boston: Economy lacks forward momentum. When characterizing the outlook, respondents have substituted "significant challenges" for their earlier "cautious optimism." Retail contacts report sales below plan and manufacturers say results this year have been disappointing so far. Bad weather and the war with Iraq have hurt sales and diverted consumers' attention away from the malls. Capital spending budgets are said to be in line or slightly above actual spending in 2002. Information technology accounted for most of those capital spending budgets. .

New York: Economy has slowed further since the last report. Contacts in many sectors attributed that trend to war and weather, which may have led to postponed economic activity. Retailers said the war and weather were big factors in March sales, which were well below plan. Consumer confidence has shown signs of modest improvement since the war began. Manufacturing activity has been mixed but generally flat. Inventory levels were described as manageable for the most part, although stocks of warm-weather merchandise have been high. Housing, while still strong, showed signs of softening in February and March, but there are scattered reports of a pickup in April. .

Philadelphia: Business conditions softened in April. The outlook in the business community is cautious. Manufacturers reported declines in shipments and new orders, compared with March. Early-April retail sales of general merchandise were running below the rate set a year earlier, and sales of autos and light trucks were also off. Bank lending edged up, with small gains in business and residential real estate lending. For service firms, business conditions in April were generally flat. Looking forward, manufacturers expect some increases in shipments and orders over the next six months, but contacts in other sectors were less optimistic. Employment agencies expect small hiring increases by financial services firms in the second quarter, but they expect little change in the job market in other sectors. .

Cleveland: Economic growth remained subdued, and reports regarding economic conditions remained mixed. The outlook seems to be improving slowly. Most contacts expect conditions to improve somewhat in the next six months. In March and April, commercial construction and steel manufacturing remained weak, but the tone of reports in other industries was generally more positive than it has been in the last three reports. Most of the contacts who did report more growth said improvements were "slight" or "small." Very few firms reported any noticeable change in business due to the war in Iraq, and retailers said they noticed a change only during the first few days of the conflict. Significantly fewer firms noted plans to cut jobs; overall, the labor supply in the district is plentiful and no firms had trouble filling openings. .

(MORE) Dow Jones Newswires

04-23-03 1400ET- - 02 00 PM EDT 04-23-03

Beige Book/Districts -2:Richmond,Atlanta,Chicago,StLouis

Richmond: Economic growth continued to be modest in March and early April, as bad weather and uncertainty over the economy and the war held back consumer demand. Retailers said the war and the weather hurt traffic and substantially lowered sales. But services firms reported flat revenues and little change in employment. Manufacturing activity contracted in March, and manufacturers said any plans to expand were generally on hold until the economy improves. Home sales rose, but commercial leasing and construction was generally flat. .

Atlanta: Economic activity was sluggish in most sectors in February and March, according to contacts. Labor market conditions were mostly unchanged, and firms said they were reluctant to add full-time workers. Retail sales are still around last year's level, but auto sales slipped below their pace from a year earlier. Home sales continued to be strong. Manufacturing stayed weak. Higher prices for oil and natural gas hurt most sectors of the regional economy. The travel industry reported more domestic travel, but fewer international visitors. .

Chicago: Economic activity showed few signs of improvement in March and early April, after a modest but abrupt slowdown in February. Contacts said that slowdown may have been due to heightened uncertainty before the war with Iraq. The war itself has so far appeared to have only a limited impact on the economy. Auto dealers, retailers and realtors reported a drop in customer traffic during the first few days of the war, but they said it rebounded quickly. Overall consumer spending was weak in March and April. Bankers and manufacturers said the war was perhaps the latest reason why firms were putting off spending, hiring and borrowing decisions. Many businesses are still struggling with higher input costs and little pricing power, although oil prices have fallen somewhat as the war has progressed. .

St. Louis: Economic activity stayed soft in recent weeks. In manufacturing, there are continued reports of plant closings, layoffs and cutbacks. Retailers said sales were relatively flat compared with last year, attributing sluggish consumer spending to bad weather and a late Easter. But some retailers are optimistic about spring sales. Home sales are still up in most areas, and commercial real estate markets are still sluggish. Total loan demand has fallen at the region's small and mid-sized banks. .

(MORE) Dow Jones Newswires

04-23-03 1407ET- - 02 07 PM EDT 04-23-03

Beige Book/Districts -3: Minneapolis, K.C., Dallas, S.F.

Minneapolis: Economic activity fell slightly in March and early April. The manufacturing, commercial real estate, consumer spending and mining sectors were down. Energy sector was flat. Winter tourism had a slow start, but rebounded somewhat. And residential real estate and agriculture grew. Overall wage and price increases were modest, but contacts noted significant increases in insurance and natural gas prices, as well as decreases in gasoline prices. Recent retail spending was generally slow compared to last year, in part due to a late Easter and consumers' focus on the war. .

Kansas City: Economy showed some signs of weakening in March and early April, due in part to the onset of war. Retail sales as a whole edged down, and manufacturing activity softened. Many retailers said traffic and sales slowed further after the start of the war with Iraq. Commercial real estate remained in a slump, but residential real estate maintained its strong pace and energy activity continued to expand. Wage and price pressures remained largely subdued, although prices continued to rise for some manufacturing materials. In the tourism industry, fresh snow at Rocky Mountain ski resorts appeared to offset hesitancy caused by the start of the war. .

Dallas: Economic activity was mixed from mid-February through mid-April. The energy industry, including energy-related manufacturing, picked up strongly. But other manufacturing activity was mostly flat or down. Service sector activity was also mixed, and retailers reported a drop in sales. Construction and real estate markets continued to be soft. The financial service industry reported little change in activity. Contacts vary in their outlook for future activity. Some industries are optimistic that demand will pick up, especially as there is less uncertainty surrounding the war. But other contacts were more pessimistic, saying the economy might not bounce back quickly. These contacts said businesses may be reluctant to make capital investments until they are certain of rising demand in their industry. .

San Francisco: Economic growth seemed sluggish in March and early April, with limited negative effects from the start of the war with Iraq. General retail sales held up, although they weakened toward the end of the survey period in part because of war concerns. The war, along with the East Asian outbreak of the respiratory disease SARS, had a noticeable negative impact on travel and tourism. Price and wage pressures were minimal, and retail gasoline prices generally stayed at high levels. Manufacturers saw a slight net fall in demand, including for high-technology products. Sales of farm products were solid, due partly to strong export demand. Contacts reported too much capacity for various manufactured products, but capacity expansion in the fuel and energy sectors. Home demand was generally strong, with weakening in some markets. Commercial real estate markets weakened further. Banks saw ongoing weak demand for business loans and strong demand for home mortgages. .

-By Rebecca Christie, Dow Jones Newswires; 202 862 9249; rebecca.christie@dowjones.com .

(END) Dow Jones Newswires

04-23-03 1431ET- - 02 31 PM EDT 04-23-03

[Starwind]

Fyi...

[Coop]

-Oil prices down.
-Dow up ~1000 points over last month
-Companies on average meeting/beating estimates on quarterly reports.
-Military personnel returning from war to impact local economies.
-Anxiety over war removed and over terrorism lessened.
-USAir and Kmart emerge from bankruptcy.

I'd say there's a decent amount of positive news concerning the economy.

[Steven W.]

this must have gotten you really excited!

[onehipdad]

FoxNews Financial reporters absolutely giddy last night, sent me off to check my 401K - up 4.2% from Fri.

WOO-HOO!!!

[Tauzero]

Why would anyone believe anything from Reuters?

Oh, wait a minute...

[Coop]

Good to hear. Perhaps my 201K is on its way back to being a 301K. (And no, I'm not talking dollar amounts here!)

[Starwind]

Beige Book -4: Some Price Pressures, But No Inflation



Even as labor markets remain soft, layoffs in some districts are moderating and some districts reported greater demand for temporary labor, the report said.

The Cleveland and Kansas City districts reported fewer plans for staff reductions, while New York, Atlanta and Dallas reported stronger demand for temporary workers.

Several districts reported a lack of upward pressure on wages, but firms continue to note "substantial" increases in the costs of health care and insurance, the Fed said.

Many districts reported price pressures in specific segments of their economies, but inflation remains subdued, the Fed said. Most manufacturers held the prices of their goods steady despite substantial price increases in energy-related inputs.

The manufacturing sector remains weak, with nine of the 12 Fed districts reporting slower manufacturing activity.

"Still, pockets of improvement in the industry were noted by more than half the districts in this report," the Fed said.

The New York and Philadelphia districts seemed optimistic that manufacturing activity would improve somewhat within the next six months, the Fed said.

As for the housing market, homebuilding activity remained strong in all districts, the Fed said. However, some homebuilders suggested there was a "slight softening" in their markets. Commercial real estate is still in a "slump," the Fed said.

Mortgage lending, buoyed by refinancing activity, remained strong and a few districts noted some improvement in commercial loan demand. Office vacancy rates remained on the rise in most districts, the Fed said. .

-By Deborah Lagomarsino, Dow Jones Newswires; 202-862-9255; deborah.lagomarsino@dowjones.com .

(END) Dow Jones Newswires

04-23-03 1503ET- - 03 03 PM EDT 04-23-03

[Lazamataz]

Please increase the labor rolls by ONE. Thank you.

[Lazamataz]

I'd say there's a decent amount of positive news concerning the economy.

According to those who Say Nay, we are still so totally xcrewed.... ;^)

[Starwind]

Please increase the labor rolls by ONE. Thank you.

I assume that means you got a new job...congrats and best wishes. All the more to entertain with.

[Coop]

According to those who Say Nay, we are still so totally xcrewed.... ;^)

Rumor has it that some of these financial experts were up until very recently employed as military analysts. :-)

[Coop]

Entertain women? No sweat!

All I have to do is enter a room and the ladies start laughing.

[Lazamataz]

I assume that means you got a new job...congrats and best wishes. All the more to entertain with.

Yeah. I plan on singlehandedly revitalizing the economy. That's right. Me. One person. I will rescue Murrica.

And I can even afford to send some money to Free Republic

(and I will now that Free Republic has stopped jumping all over people who might criticize Bush a little)

[Lazamataz]

Rumor has it that some of these financial experts were up until very recently employed as military analysts. :-)

LOL! Probably on Al Jazeera.... I'm CERTAIN one of these Naysayers is really Baghdad Bob.....

[Black Agnes]

So when are we going to hear the patter of little lazlet feet?

[Lazamataz]

By the way, what's with the extra H in the city name hBhahghdhahdh?

[expat_panama]

Coop, you are right on the money. The economy is so much better than it was than during the 'prosperity' of the late '90's, but the lib press wants it to look bad. This press release about the Beige Book whines and moans but is short on hard numbers. The facts are that unemployment, gdp growth, deficit as a gdp-percent, stock prices, and income growth-- they’re all in good shape. The press used to check these figures before they talked about boom or bust; now the press just says if the pres is republican than it’s a depression – end of discussion.

[Lazamataz]

So when are we going to hear the patter of little lazlet feet?

NEVER! I might consider patter of lazlet PAWS!

[SierraWasp]

"I will rescue Murrica."

Wull GOOD!!! Murrica shore needs it!!!

You have been missed by this member of the bored!!!

Welcum back, you Born Again Taxpayer!!!

As you can see... my addiction to adamant exclamation has worsend!!! (grin)